Treasuries Fall on Employment Report - Mortgage Rates to Follow

The 10 year Treasury rate fell to 2.82% today, a 16-year low before closing at 2.83%. That means that 30-year mortgage rates will continue to drop, potentially moving under 4.50%.

The inpetus for the drop in Treasury rates was the jobs report. The Labor Department said that private employers added only 71,000 jobs in July, fewer than what economists forecast. Jan Hatzuis from Goldman Sachs believes that we are in for another bout of deflation (see NY Times article). The jobs number is exactly what he predicted according to his deflation model. If deflation does take hold, then look for 30 year mortgage rates to fall below 5% over the next 12 months as the Fed continues to try and stimulate the economy.